The Fourth District
Court of Appeal has rejected a defendant’s effort to use extrinsic evidence to
defeat what the court characterized as the clear and unambiguous language of
the defendant’s statutory settlement offer.

Friday’s ruling leaves
Bergen Brunswig Corporation, one of the nation’s largest drug companies, liable
to its former chief executive for millions of dollars in retirement and other
benefits, on top of a $5 million lump-sum settlement of his wrongful
termination claim.

Bergen Brunswig ousted
Donald R. Roden in November 1999 after the value of the company’s shares
tumbled more than 80 percent in less than a year. The Orange-based company
later agreed to a merger with rival AmeriSource Health Corporation, forming
AmeriSourceBergen Corporation, which may be the nation’s largest drug
distribution firm.

Roden, who became the
company’s president and chief operating officer in 1995 and CEO in 1997, had a
contract requiring the company to give him three years’ notice before
terminating him without cause. After he was fired, he sued for breach of
contract, defamation, and infliction of emotional distress, among other things.

After lengthy
negotiations, Bergen made, and Roden
accepted, a Code of Civil Procedure Sec. 998 settlement offer. But the
agreement was, as Justice Eileen Moore said Friday, “stunningly brief” and led
to more rancor.

Proposals Rejected

After Roden rejected
several proposals to resolve issues not specifically resolved by the
settlement, Brunswig moved to set aside the judgment. Orange Superior Court
Judge Stuart Waldrip denied the motion and entered a post-judgment order
clarifying the judgment on terms favorable to Roden.

The settlement offer
consisted of three paragraphs. Under paragraph 1, Roden was entitled to $5
million “less legally required deductions.” Paragraph 2 required the company to
continue certain benefits specified in the employment contract, including
health, life, disability and retirement benefits plus a car allowance, and
Paragraph 3 entitled Roden to reasonable attorney fees.

On appeal, the company
challenged one aspect of Waldrip’s decision—his conclusion that retirement
benefits were covered by Paragraph 2, and thus payable in addition to, rather
than as part of, the $5 million.

Moore, writing for the Court
of Appeal, said the agreement was clear—retirement benefits are covered by
paragraph 2 and are thus payable in addition to the paragraph 1 lump sum. She
rejected the company’s argument that extrinsic evidence showed either that the
parties intended to include the retirement benefits in the $5 million, or that
there had been no meeting of the minds and that the judgment should be set
aside.

Previous Offer

Bergen pointed to a
previous settlement offer, which Roden rejected, in which the company offered
to reduce the retirement benefits to a present value of just under $1.7 million
and to pay that sum to Roden, in addition to continuing his insurance and
automobile benefits and resolving issues involving stock options, lawyer fees,
and an outstanding loan, among other things.

The company also noted
that while the later Sec. 998 offer was pending, it tendered Roden a check for
nearly $2 million, which the company said represented the entire amount owed
Roden under his contract—including the present value of his retirement
benefits—less offsets.

That tender “’Twas a
puzzlement,” Moore wrote, because there
was no explanation of how it related to the Sec. 998 offer. It was not until
after Roden accepted the Sec. 998 offer, she explained, that Bergen said it
intended to present Roden with two alternatives—one in which Roden would take
the check and continue the litigation, and the other in which he would accept
the Sec. 998 offer and end the lawsuit.

That interpretation, the
company said, was supported by correspondence between the attorneys after Roden
accepted the offer, indicating that the company never intended to pay Roden
retirement benefits in addition to the $5 million.

Bergen, Moore said, was trying to use
post-settlement communications “to bootstrap itself into a better position by
‘clarifying’ the contract terms before the court entered judgment.” But courts
cannot rely on post-settlement communications to determine what the parties
intended at the time of the settlement, the justice insisted.

Nor can the
pre-settlement communications result in the judgment being set aside, Moore said, given the lack of
ambiguity in the settlement offer.